TLDR:
- The Israel Innovation Authority and the Ministry of Finance have launched a program, Yozma 2.0, to support 18 institutions in VC investments.
- The initiative aims to address the investment gap in Israeli startups, especially early-stage ones, due to the global economic slowdown and Israel’s complex geopolitical environment.
The Israel Innovation Authority and the Ministry of Finance have initiated a program called Yozma 2.0 to promote investments by institutional bodies in Israeli high-tech through local venture capital funds. The program aims to replicate the success of a previous initiative from the 1990s and involves providing $155 million in funding to 18 institutional entities for investments in Israeli venture capital funds. The initiative is oversubscribed by $474 million, indicating strong interest from institutional investors. To manage this over-demand, a second phase of the fund is planned for the 2025 budget year.
The program is designed to provide a safety cushion for the local industry by using institutional bodies’ savers’ money. The Innovation Authority will match capital for institutional investment in Israeli venture capital funds and potentially forgo its share of the returns to boost returns for institutional investors. This initiative is expected to increase the capital available to Israeli startups by around $1 billion per year.
CEO of the Israel Innovation Authority, Dror Bin, believes that the Yozma Fund will incentivize investment commitments of institutional entities in Israeli funds over the next 18 months to prevent stagnation in early-stage investments in Israel. The fund aims to strengthen partnerships between institutional entities and Israeli venture capital funds, thereby enhancing the local venture capital market’s stability against future crises.
The main goal of the fund is to support Israeli high-tech companies, foster ties between institutional entities and local venture capital funds, and bolster the stability of the local venture capital market. The program offers a yield enhancement mechanism for institutional investors in Israeli venture capital funds over the next 18 months, with no intervention from the Authority in investment considerations.
While the initiative shows promise, the key challenge lies in how Israeli venture capital funds will collaborate with institutions amidst strict regulations. Previous attempts to integrate savers’ money into the high-tech industry have had mixed success due to differing investment preferences and risk perceptions between institutions and funds.
